Federal Treasurer Joe Hockey appears to have taken the real estate industry lobby group's advice in suggesting people should be able to use their superannuation to buy their first homes, as the peak superannuation body urged caution for such an approach.

The Real Estate Institute of Australia outlined the radical idea in its budget submission to Mr. Hockey last month, with the treasurer saying Australians ought to start thinking seriously about the way in which their super savings can be used in the future because people were working and living for longer.

"We are prepared to look at a diverse range of proposals to help young Australians buy their first home," Mr. Hockey said, suggesting that super could be used for a deposit on a first home or job retraining.

His comments were quickly criticized by Labor and some economists, but REIA chief executive Amanda Lynch said using super to help pay for a first home could make housing more affordable and build retirement savings.

"We believe that owning a home is the biggest generator of long-term financial security for Australians and the earlier you can access the housing market, the more secure your retirement will be because most Australians aspire to have paid of their home before they retire," Ms Lynch said.

Shadow Treasurer Chris Bowen rejected the suggestion, saying it would have the opposite effect.

"[The] plan would have the likely effect of not only undermining retirement incomes but also driving housing prices up further and making it harder for first-home buyers," he said.

Association of Superannuation Funds of Australia chief executive Pauline Vamps said the plan would benefit the rich far more than the poor.

"There are significant equity issues when it comes to allowing the release of concession-ally taxed superannuation contributions for home equity," she said, referring to higher income earners paying 45 cents in the dollar in income tax but only 15 cents in the dollar on superannuation contributions.

They would be able use concession-ally taxed super money to buy a house and then top up their super, again at a low tax rate.

"There significant equity issues when it comes to allowing the release of concession-ally taxed superannuation contributions for home equity," she said.

But Ms Lynch stood by the proposal.

"The fact about buying a house is that you are actually saving all that equity and the compounding interest will be beneficial. To say that investing in superannuation, which is mainly skewed towards shares, is a safe proposition doesn't hold up to scrutiny.

"In the years since the GFC we have actually seen super being more of a financial risk than previously and a lot of people close to retirement have found their super balances have been dwindling."

1.

2.

Why would there be such an effect on house prices?

A. The policy would create an excess of supply and prices would adjust by going down.

B. The policy would have no effect on the housing market.

C. The policy would create an excess of demand and prices would adjust by going up.

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Answer rating: 100% (QA)

1 Explanation If peoples use their superannuation to buy their first home than in the shortrun the d... View the full answer